PROJECT 6: Insurance Choices by the Medicare Population The Medicare landscape has changed dramatically with the introduction of managed care. The most recent figures show more than 14 percent of Medicare beneficiaries enrolled in managed care plans--up 132 percent since 1992. The Balanced Budget Act of 1997 may only accelerate this trend. As part of the law, Congress creased a "Medicare+Choice" program to expand the plan options available to Medicare beneficiaries. These changes may have profound consequences for the elderly, whose welfare-as measured by their consumption, wealth and health-depends integrally on their health insurance choices. Unfortunately, not much is known about the insurance choices, and in particular managed care choices, of elderly Americans. This proposal will take an exhaustive look at the insurance choices of the elderly with Medicare, paying particular attention to managed care. The data come from an ongoing panel study of the entire population (the Medical Expenditure Panel Study), as well as two biennial surveys of the elderly (the Health and Retirement Survey and Asset and Health Dynamics of the Oldest Old). We will begin by describing the patterns of enrollment and disenrollment in Medicare managed care, the purchase of supplemental Medigap insurance, and the provision of employer-provided supplemental insurance among the Medicare-eligible elderly. We will then develop and estimate individual and household-level models of insurance choice. We will test if Medicare choices are responsive to the distribution of out-of-pocket expenses and risk preferences. Because of inertia in plan choice, we will also examine choices at the time of first eligibility, including an investigation of how past insurance (especially experience with managed care) affects the initial cost. Finally, we will examine the impact of the Balanced Budget Act of 1997 on Medicare choices.